No Permits? That Could Bust Your Deal

Do-it yourselfers assume that they are saving money by skipping the permits for room additions or modifications. Another motivation is the assumption that improvements will trigger a tax increase.What many people find out the hard way is this:

Unpermitted rooms may have no value from an appraiser’s point of view

A buyer may be spooked by the lack of permits, even if the quality of improvements were done in a workman like manner

Inspections may cast light on the fact that the property was not done up to code and cause a buyer to pull out of contract

A buyer may decide to proceed, providing the seller makes the appropriate corrections to defects in workmanship or code, ALONG WITH proper permits. These after-the-fact corrections may be much more costly and wipe out any perceived savings.

What’s more, when the property falls out of contract, the seller has to make those needed repairs anyway OR disclose those material facts to the next buyer.That costs time on market, often leading to a reduction in price, or a stigma that there is something wrong with the property.

The fact of the matter is simple – it is what it is. If you don’t have a permit and you plan on selling your house, do some investigative work.Prior to selling you could:

Get a home inspection and find out if there are any defects or code violations. Then fix them.

Get an appraisal and see what you’re actually dealing with

Consider obtaining a permit after the fact and making any necessary corrections .

Was the workmanship of subpar quality where this ‘added space’ is actually a deterrent to the sale? It’s possible a tear down might be less objectionable. If an appraiser can’t give value to unpermitted square footage, how will it help you sell your house?

Often times I see sellers turn a blind eye and hope that the problem will just go away. Well, that’s rarely the case.Talk to the City, find out what is permitted and what is not, and take measures to rectify the issue, or at the very least, disclose it to the buyer upfront. Then when a buyer makes an offer on your property, you’ll know it is with a full understanding of what is permitted and what is not.

Michelle, it busted a deal today for my buyer's, but that was a good thing. The appraisal came in $80,000 UNDER list price, and the lender deemed it unacceptable. Can you imagine how he would have felt had his over asking offer made it to the finish line? Dodged a bullet I'd say.

You bet Ralph. One of my clients had three funky rooms added to her house. Her ex had done a do-it-yourself job, and botched it up royally. Buyers loved the house till they got to that part. And no one wanted to buy it - she's still stuck with it!

Hi Karen - Excellent post! One of our checklist items for any new listing or any home our buyers put under contract is an open permit check with the city or county. And if we see any obvious improvements, we research permits on those as well. We learned that lesson the hard way a long time ago.

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